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August 3, 2012

Roubini Website: Draghi Failure ‘Epic’

Uproar continues over ECB head’s decision to do little to further intervene in eurozone

Roubini at the Nomura Asia Equity Forum in 2011. (Photo: AP)

Nouriel Roubini’s EconoMonitor website published a scathing piece by University of Oregon Professor Tim Duy on Friday (later tweeted by Roubini), in which Duy refers to a lack of concrete steps taken by European Central Bank chief Mario Draghi as “epic” and “almost funny if it wasn’t so sad.”

“Teetering on the abyss with record high unemployment putting the lie to his claims about the strength of the eurozone, Draghi chooses to play mind games with financial markets,” Duy writes. “This marks a new low in European crisis management.”

After Draghi’s bold words about protecting the euro last week, markets expected him to deliver some sort of drastic action to do so and to relieve pressure on bond yields, which have climbed steadily higher for Spain and Italy. But the ECB “failed to meet the unintentionally ramped-up expectations” of financial market participants.

Indeed, the ECB “did exactly nothing,” according to Duy. “No new policies, just vague promises about policies that may or may not be implemented in the future.”

“When all you have is a hammer, everything is a nail. The ECB will not do anything until European rescue funds are activated under traditional guidelines.”

The bottom line, he concludes, is that it was an epic policy failure by the ECB.

"Not only is the ECB willing to let the euro crisis simmer for another month, but their communication strategy is abysmal. Draghi very desperately needs to be more aware of the impact of his comments."